They get a very wealthy salary, and all they have to do is get maximum return as fast as possible. They take risks without ever thinking about the impact. All they want to do is make quickly lots of money for themselves. And if the fund crashes there is no problem. Those who invested in the fund will take all the losses, not the traders that are in charge. If the trader would have to trade with his own money he would NEVER take the same risks. It is like a formula 1 driver who has to make the fastest lap. The worst-case scenario is that he will crash the car; but as he does not own the car he cannot get hurt (financially). I donât think it is a good deal to give lots of money to someone else and loose all control on what he will do with your money. And at the end of the story you will take all the losses and only get part of the potential profits if ever profit is made.
Yes... you are right... IF you ignore my phrase "trading strategy"... And assume the principals are ** not trying to win **... And the principals are basically inexperienced and incompetent. That's a lot of assumptions I did not make. Mathematically... It's almost as hard to design a "trading strategy" that loses consistently... Than to design a strategy that wins consistently. The vast majority of strategies are worthless... Meaning... they will just track the market less expenses in the long run... And fall into the "fooled by randomness" category.
================ With all due respect; they should have also thought about truth in advertisingas you hinted. Prided themselves on risk management'', indeed Interesting WSJ article also
Let me put this in very simple terms. At at-home trader daytrades relatively small amounts of money and can get in and out of the market like he is in a small speedboat. The mighty hedge fund plays with much larger amounts. Instead of piloting a small speedboat, they pilot large ships. As a small time at-home trader, I can head for the exit and fit through with my speedboat when need be. The hedge fund on the other hand will have a much harder time getting through that door when it comes time to exit. and thats how he lost 5 billion. Any questions?